2024-05-10
According to analysts at data firm CryptoQuant, the recent Dencun upgrade of Ethereum has caused the cryptocurrency to become inflationary once again, potentially undermining its status as "ultra-sound" money.
In a report released on Wednesday, CryptoQuant stated that the decrease in transaction fees on the Ethereum network resulting from the Dencun upgrade has led to a significant drop in the amount of ether burned.
This decrease in burnt ether is one of the lowest levels since the transition from proof-of-work to proof-of-stake consensus mechanism during the Merge.
Additionally, the report highlighted that the supply of ether is currently growing at its fastest daily rate since the Merge.
Before the Dencun upgrade, the high level of network activity on Ethereum resulted in more fees being burned, which reduced the supply of ether.
However, after the implementation of the Dencun upgrade, the total amount of fees burned has become independent of network activity, as noted by CryptoQuant analysts.
The report concluded that, based on the current level of network activity, Ethereum will not return to a deflationary state.
It is highly likely that the notion of ether as "ultra-sound" money has either died or would require significantly higher network activity to revive.
The Dencun upgrade, implemented on March 13, 2024, allows for the storage of additional data in "blobs" on the Ethereum network.
This upgrade improves efficiency and reduces costs for Layer 2 transactions.
As of the time of writing, the price of Ether is approximately $3,018, experiencing a 1% decrease in the past 24 hours according to coinmarketcap.
Meanwhile, the GM 30 Index, representing a collection of the top 30 cryptocurrencies, experienced a 0.71% decrease during the same period, reaching 129.87.
